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Tag Archives: US financial sector

Liberty Street — Leverage Rule Arbitrage

Our evidence suggests that banks were arbitraging the SLR (and eSLR) rule by shifting from safer assets toward riskier, higher-yielding ones. Evidence from other studies we discuss point to the same behavior by banks or dealers with portfolios heavily weighted toward safe, low-yield assets as part of their business models. Policymakers are aware of this regulatory arbitrage and are addressing it. FRBNY — Liberty Street EconomicsLeverage Rule Arbitrage Dong Beom Choi, Michael Holcomb, and...

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